OPINION.
Turner, Judge:
Petitioner Shattuck-Ohio Foundation contends that it is entitled to exemption under both section 101 (6) and 101 (14) of the Internal Revenue Code of 1939,1 and, alternatively, that if it is not exempt under these sections of the Code, it is then exempt under the provisions of section 302 (d) of the Revenue Act of 1950.2
To qualify for exemption under section 101 (6), the Foundation must satisfy three conditions. First, it must have been organized and, during the years herein, must have been operated exclusively for educational purposes. Second, no part of its earnings may have inured to the benefit of any private shareholder or individual. And third, no substantial part of its activities may have been the carrying on of propaganda or otherwise attempting to influence legislation.
The parties are in agreement that the Foundation did not indulge in the carrying on of propaganda or otherwise attempting to influence legislation. It is clear also that it was organized exclusively for educational purposes. The specific purpose of its organization, as shown by the evidence, was to give financial assistance to the Shattuck School, and though, the assistance to he given, according to its charter, is not limited to the Shattuck School, any other organizations which may be benefited must be nonprofit corporations organized under the laws of the State of Minnesota for educational purposes and which are engaged in the same activities as the Shattuck School, namely, in the conduct of schools of learning for the education of boys below the college or university level.
It is the contention of the respondent that the Foundation was not operated exclusively for educational purposes during the years herein, since in those years it made no distributions of income for educational purposes, as stated, but used substantially all of its income in making payments to the sellers of the Furnace Company stock in satisfaction of notes of the Foundation held by those sellers. He takes the further position that by reason of tire payments of substantially all of the income of the Foundation to the sellers of the stock, the net earnings of the Foundation did inure to the benefit of private individuals, contrary to the requirement of the statute.
There can be no question, we think, that the last contention stated is not well taken. Respondent makes no point that the trustees of the Shattuck School in organizing the Foundation did not do so in good faith or that the transactions and negotiations in the purchasing of the Furnace Company stock were not at arm’s length. Moreover, the price paid for the stock in our opinion appears to have been reasonable, and the respondent does not contend otherwise. In acquiring the stock of the Furnace Company the Foundation was making an investment which under its charter could be used for no other purpose than the benefit of educational institutions in the State of Minnesota, and more particularly nonprofit corporations organized under the laws of that State for educational purposes and engaged in conducting schools of learning for the education of boys below the college or university level. Inasmuch as the investment in the Furnace Company stock was a sound investment and the price was fair, the payments from the Foundation’s income to the sellers of the Furnace Company stock did not constitute an inurement of the Foundation’s income to them but was the consideration in a purchase of stock for value received.
Remaining is the question whether the use by the Foundation of substantially all of its income for making the investment in Furnace Company stock, as contrasted with immediate and direct application thereof to the Shattuck School or other comparable schools, makes the operation of the Foundation other than an operation exclusively for educational purposes within the meaning of section 101 (6). The only reference in the statute bearing specifically upon the use of income is the prohibition that no part of the net earnings of the corporation, fund, or foundation may inure to the benefit of any private shareholder or individual. Conversely, it is reasonable to conclude, we think, that the requirements of 101 (6) are satisfied if all of the income inures to the benefit of, or is in promotion of, an operation which is exclusively educational. Certainly there is no requirement that the income must either be used or distributed in the year realized for the described purpose, and we know of no case wherein a corporation, fund, or foundation was denied exempt status merely because it accumulated its income for distribution in a succeeding or later year. See Alan Levin Foundation, 24 T. C. 15. On the record here it may be said, we think, that there is no present intention that any of the income invested in the Furnace Company stock will ever be applied directly to school operations, but, on the other hand, it does appear that the fruits of the investment must be used exclusively for the prescribed purposes. In short, the facts show with certainty that all of the income of the Foundation, including that which is being invested in the Furnace Company stock must inure solely and exclusively to the benefit of the Shattuck School or some other Minnesota nonprofit organization organized and operated exclusively for educational purposes. Such being the case, it follows, we think, that the use of the income of the Foundation in the purchase of the Furnace Company stock was the use thereof solely and exclusively for the educational purposes for which the foundation was organized. Compare Alan Levin Foundation, supra. See also Arthur Jordan Foundation v. Commissioner, 210 F. 2d 885. We accordingly hold that the Shattuck-Ohio Foundation was organized and operated exclusively for educational purposes within the meaning of section 101 (6).
Petitioner Ohio Furnace Company, Inc., likewise, claims exemption from Federal income tax under section 101 (6) of the Code and section 302 (d) of the Revenue Act of 1950. The Furnace Company during the years in issue was operating a company engaged in the trade or business of the sale and distribution of heating and lighting machinery, facilities, appliances, and equipment. All of the stock of the Furnace Company was owned by the Foundation and during the years here in question the entire net earnings of the Furnace Company were distributed in dividends to the Foundation or retained by the corporation for its current needs. Petitioner contends that inasmuch as it was organized and operated exclusively as a “feeder” corporation for the Foundation, that no part of its net earnings inured to the benefit of any private shareholder or individual, and that all the years involved are prior to 1951, it is an. exempt corporation under the principle of Roche's Beach, Inc. v. Commissioner, 96 F. 2d 776; C. F. Mueller Co. v. Commissioner, 190 F. 2d 120; Jack Little Foundation v. Jones, 102 F. Supp. 326; Sico Co. v. United States, 102 F. Supp. 197; Rome Oil Mill v. Willingham, 68 F. Supp. 525; and Willingham v. Rome Oil Mill, 181 F. 2d 9. Petitioner recognizes the conflicting re-suits reached by the circuit courts in the Mueller case and in United States v. Community Services, Inc., 189 F. 2d 421, as well as the consideration given the question herein involved by this Court in reaching its decision in the Mueller case at 14 T. C. 922, and in its subsequent decisions in Joseph B. Eastman Corporation, 16 T. C. 1502, and Donor Realty Corporation, 17 T. C. 899.
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OPINION.
Turner, Judge:
Petitioner Shattuck-Ohio Foundation contends that it is entitled to exemption under both section 101 (6) and 101 (14) of the Internal Revenue Code of 1939,1 and, alternatively, that if it is not exempt under these sections of the Code, it is then exempt under the provisions of section 302 (d) of the Revenue Act of 1950.2
To qualify for exemption under section 101 (6), the Foundation must satisfy three conditions. First, it must have been organized and, during the years herein, must have been operated exclusively for educational purposes. Second, no part of its earnings may have inured to the benefit of any private shareholder or individual. And third, no substantial part of its activities may have been the carrying on of propaganda or otherwise attempting to influence legislation.
The parties are in agreement that the Foundation did not indulge in the carrying on of propaganda or otherwise attempting to influence legislation. It is clear also that it was organized exclusively for educational purposes. The specific purpose of its organization, as shown by the evidence, was to give financial assistance to the Shattuck School, and though, the assistance to he given, according to its charter, is not limited to the Shattuck School, any other organizations which may be benefited must be nonprofit corporations organized under the laws of the State of Minnesota for educational purposes and which are engaged in the same activities as the Shattuck School, namely, in the conduct of schools of learning for the education of boys below the college or university level.
It is the contention of the respondent that the Foundation was not operated exclusively for educational purposes during the years herein, since in those years it made no distributions of income for educational purposes, as stated, but used substantially all of its income in making payments to the sellers of the Furnace Company stock in satisfaction of notes of the Foundation held by those sellers. He takes the further position that by reason of tire payments of substantially all of the income of the Foundation to the sellers of the stock, the net earnings of the Foundation did inure to the benefit of private individuals, contrary to the requirement of the statute.
There can be no question, we think, that the last contention stated is not well taken. Respondent makes no point that the trustees of the Shattuck School in organizing the Foundation did not do so in good faith or that the transactions and negotiations in the purchasing of the Furnace Company stock were not at arm’s length. Moreover, the price paid for the stock in our opinion appears to have been reasonable, and the respondent does not contend otherwise. In acquiring the stock of the Furnace Company the Foundation was making an investment which under its charter could be used for no other purpose than the benefit of educational institutions in the State of Minnesota, and more particularly nonprofit corporations organized under the laws of that State for educational purposes and engaged in conducting schools of learning for the education of boys below the college or university level. Inasmuch as the investment in the Furnace Company stock was a sound investment and the price was fair, the payments from the Foundation’s income to the sellers of the Furnace Company stock did not constitute an inurement of the Foundation’s income to them but was the consideration in a purchase of stock for value received.
Remaining is the question whether the use by the Foundation of substantially all of its income for making the investment in Furnace Company stock, as contrasted with immediate and direct application thereof to the Shattuck School or other comparable schools, makes the operation of the Foundation other than an operation exclusively for educational purposes within the meaning of section 101 (6). The only reference in the statute bearing specifically upon the use of income is the prohibition that no part of the net earnings of the corporation, fund, or foundation may inure to the benefit of any private shareholder or individual. Conversely, it is reasonable to conclude, we think, that the requirements of 101 (6) are satisfied if all of the income inures to the benefit of, or is in promotion of, an operation which is exclusively educational. Certainly there is no requirement that the income must either be used or distributed in the year realized for the described purpose, and we know of no case wherein a corporation, fund, or foundation was denied exempt status merely because it accumulated its income for distribution in a succeeding or later year. See Alan Levin Foundation, 24 T. C. 15. On the record here it may be said, we think, that there is no present intention that any of the income invested in the Furnace Company stock will ever be applied directly to school operations, but, on the other hand, it does appear that the fruits of the investment must be used exclusively for the prescribed purposes. In short, the facts show with certainty that all of the income of the Foundation, including that which is being invested in the Furnace Company stock must inure solely and exclusively to the benefit of the Shattuck School or some other Minnesota nonprofit organization organized and operated exclusively for educational purposes. Such being the case, it follows, we think, that the use of the income of the Foundation in the purchase of the Furnace Company stock was the use thereof solely and exclusively for the educational purposes for which the foundation was organized. Compare Alan Levin Foundation, supra. See also Arthur Jordan Foundation v. Commissioner, 210 F. 2d 885. We accordingly hold that the Shattuck-Ohio Foundation was organized and operated exclusively for educational purposes within the meaning of section 101 (6).
Petitioner Ohio Furnace Company, Inc., likewise, claims exemption from Federal income tax under section 101 (6) of the Code and section 302 (d) of the Revenue Act of 1950. The Furnace Company during the years in issue was operating a company engaged in the trade or business of the sale and distribution of heating and lighting machinery, facilities, appliances, and equipment. All of the stock of the Furnace Company was owned by the Foundation and during the years here in question the entire net earnings of the Furnace Company were distributed in dividends to the Foundation or retained by the corporation for its current needs. Petitioner contends that inasmuch as it was organized and operated exclusively as a “feeder” corporation for the Foundation, that no part of its net earnings inured to the benefit of any private shareholder or individual, and that all the years involved are prior to 1951, it is an. exempt corporation under the principle of Roche's Beach, Inc. v. Commissioner, 96 F. 2d 776; C. F. Mueller Co. v. Commissioner, 190 F. 2d 120; Jack Little Foundation v. Jones, 102 F. Supp. 326; Sico Co. v. United States, 102 F. Supp. 197; Rome Oil Mill v. Willingham, 68 F. Supp. 525; and Willingham v. Rome Oil Mill, 181 F. 2d 9. Petitioner recognizes the conflicting re-suits reached by the circuit courts in the Mueller case and in United States v. Community Services, Inc., 189 F. 2d 421, as well as the consideration given the question herein involved by this Court in reaching its decision in the Mueller case at 14 T. C. 922, and in its subsequent decisions in Joseph B. Eastman Corporation, 16 T. C. 1502, and Donor Realty Corporation, 17 T. C. 899. Petitioner does not attempt to distinguish the factual situation here involved with that of the Mueller and Eastman cases, but on the contrary, charts, on brief, the factual similarities between those cases and the present one. Such being the state of the record, we adhere to our views as set forth in the Mueller, Eastman, and Donor Realty cases.
It does not follow, however, that the Furnace Company is not exempt for the years herein under applicable law as now constituted. Section 301 (b) of the Eevenue Act of 1950 added a provision to section 101 of the Internal Eevenue Code of 1939, which in substance states that no business corporation operated for profit shall be exempt from tax even though all of its profits are payable to exempt organizations. This amendment is made applicable only to taxable years commencing after December 31,1950. By section 601 of the Eevenue Act of 1951, Congress added subsection (d) to section 302 of the Eevenue Act of 1950. The specific language of subsection (d) provides, inter Elia, that an organization shall not be denied exemption from taxation under section 101 on the ground that it is carrying on a trade or business for profit when “all of the net earnings * * * inure to the benefit of an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly organized body of pupils or students in attendance at the place where its educational activities are regularly carried on.” As to organizations other than the one just described, it is provided that section 101 is to be construed and applied as if section 302 (d) had not been enacted. Accordingly, the question for decision is whether the net earnings of the Furnace Company inured to the benefit of an educational organization described by section 302 (d). It is petitioner’s argument that inasmuch as it was the intention of all of the parties involved in purchasing the Furnace Company and in organizing the Foundation that the Shat-tuck School should be the sole recipient and beneficiary of the net earnings of the Furnace Company and the Shattuck School fits the definition of section 302 (d), the Furnace Company is therefore exempt. In the alternative, petitioner contends that even if the broader language of the Foundation charter is used, the earnings will nevertheless inure to institutions which fall within the described organizations in section 302 (d). Eespondent, on the other hand, contends that the petitioner fails to qualify inasmuch as the earnings of the Furnace Company are not distributable nor were they distributed to any educational organization. He argues that in no light can the Foundation, which, was the sole recipient of the Furnace Company’s earnings, be viewed as an educational organization within the meaning of section 302(d).
While it is true that the Foundation does not qualify as an educational organization within the meaning of section 302 (d), that section does not provide that all the net earnings must be paid directly to the type of educational organization set forth, in that section, but that they “inure” to the benefit of such an educational organization. Thus, if the Foundation, which received all the net earnings of the Furnace Company, were to distribute the dividends received by it from that corporation to educational organizations which qualify under section 302 (d), or otherwise use the income for the exclusive benefit of such organizations, the earnings of the Furnace Company would inure to the benefit of educational institutions under that section the same as they would if they had been distributed directly. Under the charter, the only permitted distributees of Foundation income or principal are “nonprofit corporations organized under the laws of the State of Minnesota for educational purposes, and in particular to such corporations which may be engaged in conducting schools of learning for the education of boys below the college or university level.” Such grants are to be used to provide adequate and competently trained faculties and administrators; to provide for the improvement of teaching; to furnish aid and assistance, in the form of grants in aid, for buildings, research, instruction, equipment, and all other facilities for secondary education; to provide funds for vocational guidance of students at such institutions; and, generally, to aid and assist the cause of secondary education in private schools for boys in the State of Minnesota, provided that corporations conducting such schools are nonprofit educational institutions organized under the laws of Minnesota. No part of the properties or income of the Foundation is ever to be used or employed directly or indirectly for the purpose of carrying on propaganda or otherwise attempting to influence legislation, nor is any gift or grant to be made by the Foundation to any other corporation unless the recipient thereof by the terms of the gift or grant, or by its charter, is prohibited from using such grant for the purpose of carrying on propaganda or otherwise attempting to influence legislation.
The language used in section 302 (d) is specific, and defines a narrow and restricted group or class of educational institutions; the exemption therein provided is confined to those educational organizations which we generally recognize as full-time schools whose curriculum is devoted to general academic courses.
While it was the testimony of petitioner’s witnesses that the Furnace Company stock was acquired and the Foundation was organized for the sole benefit of the Shattuck School, the stated purposes of the Foundation show that in the making of grants of principal and income it is not necessarily restricted to Shattuck School, but may make such grants to “nonprofit corporations organized under the laws of the State of Minnesota for educational purposes, and in particular to such corporations which may be engaged in conducting schools of learning for the education of boys below the college or university level.” Not only does the record show that the Shattuck School is an educational organization such as is described in section 302 (d), but it is clear, we think, that any other corporation which can qualify for the receipt of grants from the Foundation is likewise an educational organization described in section 302 (d). On the facts herein, it is thus apparent that all of the net earnings of the Furnace Company must inure to the benefit of an educational organization or organizations described in section 302 (d) and none of the earnings can inure to the benefit of any private shareholder or individual. We accordingly conclude and hold that for the years herein the Furnace Company was exempt from tax under section 302 (d).
Reviewed by the Court.
Decisions will be entered for the 'petitioners.
Offer, /., concurs in the result. Fisher, J., dissents.